The America We Signed Up For: Reflections on Forced Arbitration

Let’s talk things we love about America.

Baseball in the summer and hockey in the winter; hot dogs, hamburgers and barbecue; sprawling land next to luscious rivers, big cities and small towns. We also love our right to vote and our democracy’s checks and balances — the security we, as Americans, enjoy vis á vis knowing that our rights as citizens are protected.

The problem is, our rights may not be as protected as you think.

Take forced arbitration, also referred to as mandatory arbitration. We know, you’re thinking, “huh?” And that is the whole point. Forced arbitration is a big issue now but few have heard about it. Why? Well, the corporations that put forced arbitration clauses into our everyday contracts do not want people to know about it.

So let’s take a step back. Remember what we love about America? We love our right to speak up if there is a problem, correct? That is what our court system is about, what our right to a fair trial by jury is about, what those lawsuits people pursue when they have been hurt by contaminated water, medical devices or asbestos are about, too, right? So when something is put in place that stands between a consumer (otherwise known as an everyday citizen) or a small business owner and his or her right to justice, well, then that’s going against what we love about America, right? We think so. But the Supreme Court thinks differently.

At the end of June the Supreme Court added to its recent support of pro-arbitration rulings a case titled American Express Co. V. Italian Colors Restaurant. Italian Colors Restaurant was one of several small businesses that had disputes with American Express over fees and related issues. Each business hoped to recover a few thousand dollars from American Express. However, because these businesses had all signed a forced arbitration contract (a requirement to use American Express), they were not able to use the trial by jury route to recover this money. Instead, the business owners learned that they had to proceed with forced arbitration, a very expensive process involving many filing and administrative fees. The business owners were upset because the cost of pursuing arbitration would have been exponentially more expensive than the money they were hoping to recover.  In fact, the cost of a single antitrust market study necessary for each arbitration claim could have exceeded $1 million, while each business’ potential damages would have been no more than a few thousand dollars.

When they went to the Supreme Court as a group led by Italian Colors Restaurant, the small business owners’ argument was that they could not participate in forced arbitration because of the high cost. The business owners believed that something should be put in place to allow small business owners to deal with complaints in an affordable manner. But the Supreme Court disagreed, ruling that the financial inaccessibility did not mean that the business owners were being denied the right to pursue forced arbitration.

We have some problems with that ruling.

Perhaps what the Supreme Court did not realize — or did not care to realize — is that when a small business owner or a consumer who has been wronged is only given access to forced arbitration… and when the fees involved with forced arbitration are beyond expensive, then these folks are in fact given no options to seek justice. Dangling an impossibly expensive piece of fruit out in Neverland doesn’t cut it. We don’t want to hear that we have rights, but only if we can pay for them.

That is not the America we signed up for.